Favorite Schools

Favorite Teams

Greater New Orleans

Change Region

comments

Judge denies BP's request to delay seafood claims payments

BP Oil Spill: a Look Back

Plaquemines Parish President Billy Nungesser and La. Gov. Bobby Jindal tour
through the Roseau Grasses that mark the coastline of Southeast Louisiana at Pass a Loutre at the mouth of the Mississippi River where oil has washed ashore in May 2010.
(Ted Jackson, NOLA.com | The Times-Picayune)

A federal judge Wednesday refused a request by BP to postpone oil spill compensation payments to seafood workers after the oil giant argued that the program should be put on hold because of fraud claims against a Texas lawyer.

BP asked U.S. District Judge Carl Barbier to delay a second phase of payments under the $2.3 billion Seafood Compensation Fund in light of a lawsuit the company has brought against one of the plaintiffs' lawyers who helped craft the settlement deal.

BP alleges that San Antonio-based lawyer Mikal Watts fraudulently claimed to represent 40,000 deckhands in the seafood compensation program, including using fake Social Security numbers and other fraudulent documents.

The Plaintiffs' Steering Committee opposed the delay, arguing that Watts and his clients -- whether real or fake -- represent a small portion of overall claims and have little bearing on the ultimate settlement.

During a two-hour hearing Wednesday, Barbier pressed BP lawyers to prove that claims from the deckhands that Watts says he represents are a "driving force" in determining the settlement value. Barbier wasn't convinced.

"They at best were the tail wagging the dog, maybe even the flea on the tail wagging the dog," Barbier said, drawing subdued laughter from the courtroom. "They were significant in numbers but not significant in value as far as I can tell."

In denying a seafood compensation delay, Barbier said it could be many months before a second phase of payments are handed out. BP could ask for the judge to revisit the issue.

Thousands of Gulf Coast businesses and residents hurt by the 2010 BP oil spill in the Gulf of Mexico have started to receive payments under a massive settlement deal reached last spring, one that the company estimates could result in up to $7.8 billion in total payments. BP has grown increasingly critical of the deal in recent months, calling into question the claims process and award amounts under the settlement.

The Seafood Compensation Fund has already processed 21,871 claims and distributed more than $1 billion in payments to claimants during the first round of payments. Under the terms of the settlement, any money remaining in the fund after the first round of payments will be distributed among claimants in a second round.

BP lawyer Kevin Downey argued Wednesday that the company's civil lawsuit against Watts as well as an ongoing federal criminal investigation into his role in representing seafood claimants casts a shadow on the entire settlement negotiation.

Downey said the 40,000 deckhands Watts claimed to represent had a significant impact on the settlement amount. He said Watts had incentive to boost the number of claimants he represented to earn a spot on the Plaintiffs' Steering Committee, the group of lawyers representing the class suing BP.

But Jim Irwin, a lawyer representing the plaintiffs' class, said the oil company had ample time and resources to research Watts and the validity of his claimants in the months leading up to the settlement negotiation.

Irwin said Watts' claims of 40,000 deckhands were mostly undocumented workers without tax forms or employer verification to prove their economic loss. Undocumented deckhands fell into one of the lowest compensated categories in the settlement, only eligible to receive up to $5,000.

Irwin said BP agreed to the settlement and should be held to its word.

"They want to hold back $1.2 billion from people who are innocent, innocent people," Irwin said.

On Wednesday, Barbier did agree to a request by Watts' attorneys to delay BP's civil lawsuit in light of an ongoing criminal investigation. Watts' law offices were targeted by a Secret Service raid last year.